Moulgadi Corporation uses the FIFO method in its process costing system. Data concerning the first processing department for the most recent month are listed below: Note: Your answers may differ from those offered below due to rounding error. In all cases, select the answer that is the closest to the answer you computed. To reduce rounding error, carry out all computations to at least three decimal places.
-The cost of a completed unit transferred out of the department is closest to:
A) $63.28
B) $59.70
C) $56.06
D) $71.98

Question

Moulgadi Corporation uses the FIFO method in its process costing system. Data concerning the first processing department for the most recent month are listed below:  Note: Your answers may differ from those offered below due to rounding error. In all cases, select the answer that is the closest to the answer you computed. To reduce rounding error, carry out all computations to at least three decimal places.
-The cost of a completed unit transferred out of the department is closest to:
A) $63.28 
B) $59.70 
C) $56.06 
D) $71.98

Quizplus · Accepted Answer

Using FIFO, we take the cost of the units that were started and completed in the current period as well as the cost of the units started in the previous period and completed in the current period. The cost of a completed unit transferred out is calculated as:
Cost of units started and completed in the current period = $16,320
Cost of units started in the previous period and completed in the current period = $2,970
Total cost of units completed = $16,320 + $2,970 = $19,290
Total equivalent units = 300 + (40% x 250) = 400
Cost per equivalent unit = $19,290 ÷ 400 = $48.225
Therefore, the cost of a completed unit transferred out is closest to $48.225, which is answer choice B ($59.70 after rounding to the nearest cent).

Moulgadi Corporation Uses the FIFO Method in Its Process Costing